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UK Government’s power auctions predicted to cost £3bn

Experts warn of potential £3 billion bill for UK billpayers as government auctions secure electricity supplies

The UK Government‘s two separate auctions for power generators have prompted predictions of a potential cost exceeding £3 billion to ensure electricity supplies.

Commenting on the results of the Capacity Market T-1 auction, Sam Hollister, Head of Energy Economics and Finance at LCP Delta, said: “By this time next week, the UK Government will have run two separate auctions for power generators, a move that we predict could cost UK billpayers over £3 billion to secure our electricity supplies.

“This week’s auction saw a procurement of £273 million to ensure the lights stay on in 2025. Meanwhile, we are expecting the T-4 auction, which runs next week and is targeting 44GW of generation in 2028, to reach prices in excess of last year’s recording breaking prices of £63/kW.

“The cost for this auction alone will be over £2.6billion.”

Hollister highlighted battery developers as major beneficiaries of the recent auction.

Sam Hollister said: “The biggest winners in this week’s auction were the large number of battery developers who will be able to supply power to the UK next year when the system is short. EDF also emerged as a winner, signing contracts on their nuclear plants with life extensions into 2025.

“These winners were boosted by an underestimate of demand as well as some planned assets coming on line date either being delayed or cancelled entirely.

“For next week’s T-4 auction, we will have to wait and see the outcome, but we anticipate an increasingly tight scenario as power stations retire and electricity demand increases.”

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